In the last week, we've seen the rate on five-year fixed rate mortgages come down. If you're renewing your mortgage in the next four to six months, ask your mortgage broker to have a closer look at fixed-rate mortgages.
Remember that fixed-rate mortgages are set based on what's happening in the bond market, not what's occurring with the prime rate. I often have clients call me when the Bank of Canada makes a change in their overnight lending rate, which can impact a financial institutions prime rate. I've even heard people in the industry look at the wrong indicator. As a consumer, ensure that the person who is helping you with your mortgage is looking at the correct indicator.
The average yield of five-year bonds has been coming down and that has had a positive impact on fixed-rate mortgages. For example on December 10th the yield on the five-year bond was 2.2 and on December 11th the yield was 2.15. The bond yields bounce around and they are a good indication of what's to come with fixed rate mortgages.
If we think that historically five-year fixed rate mortgages where based on the five-year bond plus a two percent margin, five-year fixed rate mortgages should be priced at about 4.5%. As of today, many institutions are offering 4.99%.
Stay-tuned for more good news if you're renewing a fixed rate mortgage at the beginning of 2009. Sandra
No comments:
Post a Comment